Digital Modernization Will Secure Enterprise Cybersecurity And Public Stability

Key Takeaways

• Emphasis on proprietary solutions, cybersecurity, and cloud offerings strengthens recurring revenues, margins, and customer retention while supporting scalable long-term growth.
  
• Expanded public sector focus, strategic partnerships, and international market entry drive revenue diversification and enhance earnings stability.
  
• Shifting market conditions and strategic changes are increasing operational risks, margin pressures, and revenue volatility while posing challenges to Trifork's profitability and growth outlook.

Catalysts

Provides information technology and other business services in Switzerland, Denmark, the United Kingdom, the Netherlands, the United States, and internationally.

• The company's ongoing shift from service-led custom software development to a product-led model-with increasing emphasis on proprietary solutions and long-term "Run" contracts-positions Trifork to benefit from persistent enterprise digitization, substantially boosting recurring revenues, contract pipeline visibility, and future gross margins.
  
• The ramp-up in cybersecurity offerings, highlighted by the new partnership with Wingmen and integrated solutions based on Splunk, directly addresses the growing demand for secure-by-design IT from both public and private sector clients, which is likely to drive sustained revenue growth and increased customer retention.
  
• Trifork has achieved greater success in public sector tenders-now approaching 40% of group business-particularly in digital health and e-government initiatives, which are underpinned by enduring government commitments to digital modernization and are expected to provide a stable, long-term revenue base.
  
• Accelerated adoption of cloud and SaaS solutions, including Trifork's own on-prem cloud platform (Contain) and sector-specific IP products, enables larger deal sizes, higher-margin recurring software fees, and a scalable model that should support margin expansion as implementation investments moderate.
  
• Enhanced go-to-market initiatives-including a broadened sales pipeline in aviation, deeper international partnerships (e.g., with Apple, Microsoft, Deloitte), and stronger presence in promising markets like Switzerland, Oman, and the UK-set the stage for diversified revenue growth and improved earnings stability over time.

Trifork Group Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Trifork Group's revenue will grow by 7.4% annually over the next 3 years.
• Analysts assume that profit margins will increase from 6.5% today to 8.1% in 3 years time.
• Analysts expect earnings to reach €21.6 million (and earnings per share of €1.02) by about September 2028, up from €14.1 million today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting €24.5 million in earnings, and the most bearish expecting €16 million.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 17.9x on those 2028 earnings, up from 16.6x today. This future PE is lower than the current PE for the DK IT industry at 25.0x.
• Analysts expect the number of shares outstanding to decline by 0.26% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 8.27%, as per the Simply Wall St company report.

Trifork Group Future Earnings Per Share Growth

Risks

• Heightened macroeconomic and geopolitical uncertainty is leading to longer client decision-making cycles and increased reluctance toward large technology investments, which could result in slower top-line revenue growth and greater revenue volatility for Trifork in the coming years.
  
• Accelerating adoption of AI and automation is driving some enterprise clients to reassess or delay custom software projects, leading to intensified competition in bespoke development services and potentially depressing service revenues and operating margins.
  
• The company's transition from a service-led to a product-led business model requires significant upfront investments, internal reorganization, and a fundamental shift in customer engagement, resulting in near-term cost increases and margin pressure, and carries execution risks that may delay or impede financial improvements.
  
• Increasing exposure to public sector contracts brings substantial opportunities but also heightens risk, as competitive tendering processes are costly, reward realization is slow, and contract renewal is uncertain-potentially leading to revenue concentration and unpredictable earnings.
  
• Larger hardware sales as part of integrated solutions are growing, but these contracts carry lower margins than software and services, diluting group net margins and potentially weighing on overall profitability if the product mix does not shift sufficiently toward higher-margin proprietary offerings.

Valuation

• The analysts have a consensus price target of DKK120.0 for Trifork Group based on their expectations of its future earnings growth, profit margins and other risk factors.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be €267.7 million, earnings will come to €21.6 million, and it would be trading on a PE ratio of 17.9x, assuming you use a discount rate of 8.3%.
• Given the current share price of DKK89.9, the analyst price target of DKK120.0 is 25.1% higher.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.